Sovereign bonds are as overvalued as technology stocks were during the dotcom
boom, a fund manager has warned.

George Godber of Miton said that when Germany issued bonds paying no return at the height of the eurozone crisis, the investment case was akin to a technology company floating with no prospect of making profits.

"When those bonds were issued I thought: 'This is Baltimore Technologies as over again'," he said.

Baltimore was one of the defining stocks of the technology boom. It promised to revolutionise internet security but never made a profit and its shares ended up in the "90pc Club" of those that lost almost all their value.

Mr Godber said even gilts yielding 2pc were hugely overvalued on the measure normally used to value shares.

"A 2pc yield is equivalent to a price to earnings ratio of 50," he said. Shares typically trade at a p/e ratio of between 10 and 20, and investors buying shares at the higher end of the range normally expect earnings growth, which is not available on bonds.

Yields on bonds seen as safe – those issued by America, Britain, Germany and other countries outside the eurozone "periphery" – slumped to record lows when the bonds were seized on by investors desperate to preserve capital during the eurozone crisis. Bond yields move in the opposite direction to prices.

The fear is that, as the crisis recedes, bond yields are likely to return to more normal levels. Such a development would mean big capital losses for investors.

Workers who are approaching retirement and have "lifestyled" pension plans would be at risk, as these funds switch progressively from shares to bonds, although annuity rates should rise to compensate in part.

Not all dotcom shares failed. Lastminute.com, founded by Brent Hoberman and Martha Lane Fox, floated on the London Stock Exchange in March 2000 with a value of £571m. It was bought by rival online travel website Travelocity for £577m in 2005.

Mr Godber was speaking as Miton announced the launch of its new UK Value Opportunities fund.